Longer parental leave and expanded Pre-K and health care expected to be detailed

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SACRAMENTO, CA – JAN. 7: California Governor Gavin Newsom speaks as his 2-year-old son, Dutch, hides behind the lectern, after being sworn in as the 40th governor of the state of CaliforniaMonday, Jan. 7, 2019, in Sacramento, Calif. (Karl Mondon/Bay Area News Group)

SACRAMENTO — Gov. Gavin Newsom unveiled his first-ever budget proposal Thursday at the Capitol, putting dollar signs behind some of the soaring rhetoric that defined his campaign and inauguration.

“These dollars attach to real people and real people’s lives,” Newsom, 51, said as he introduced a budget totaling $209 billion, including $144 billion for the general fund.

Newsom echoed some of the fiscal caution of his fellow Democrat predecessor, former Gov. Jerry Brown, noting concern about an eventual economic downturn that he said could cost the general fund $70 billion over three years.

To that end he stressed increasing the state’s rainy-day reserve funds and paying down the state’s mounting employee pension debt.

“To make the California Dream available to all, our state must be fiscally sound,” Newsom said in his budget proposal. “This budget lays a strong financial foundation for our state by eliminating debts, expanding the rainy-day fund and paying down our unfunded liabilities.”

The January budget proposal required in state law is the first step of a months-long negotiation between the governor’s office and the state Legislature that culminates in mid-June. Newsom’s proposals drew scattered applause from those in the audience and isn’t expected to meet much resistance in the overwhelmingly Democratic Legislature.

Republican lawmakers urged more frugality Wednesday. Assemblyman Vince Fong, R-Kern County, said in a statement that Newsom’s budget amounted to an $8 billion spending increase, and urged more devoting more toward budget reserves, paying off debt and infrastructure.

“Californians across our state understand that we must live within our means yet the governor’s proposed budget continues to spend public dollars at a record-setting level,” Fong said.

Assemblyman Devon Mathis, R-Visalia, called on the governor to end what he called “the failed High-Speed Rail project.”

“Every dollar we waste on the train to nowhere is a dollar we take away from police officers, firefighters and teachers who need our support,” Mathis said in a statement Thursday.

Newsom begins the job with a problem that most public figures would love to have: What to do with a record budget surplus, projected to reach $14.8 billion next year? That only counts the money that could be spent on almost any government program — or, theoretically, returned to Californians through tax cuts. In addition to that sizable sum, California has a separate, emergency-reserve fund which the Legislative Analyst recently estimated would grow to $14.5 billion by June 2020.

The proposed budget allocates $13.6 billion to what Newsom called “budgetary resiliency” and to paying down the state’s unfunded pension liabilities, the difference between funding available for retirees and the benefits they have been promised.

That includes $4 billion to pay outstanding state budgetary debt, $4.8 billion to build reserves — bringing the state’s Rainy Day Fund to more than $15 billion this year and nearly $20 billion over four years, and $4.8 billion for unfunded retirement liabilities.

The budget’s guaranteed funding for for K-12 schools and community colleges budget grows to a new all-time high of $80.7 billion, reflecting an increase in per-pupil expenditures nearly $5,000 higher than seven years ago.

The budget includes $1.4 billion — $942 million of it an ongoing commitment — for higher education to support increased enrollment and a tuition freeze and a second year of free tuition at community colleges.

Newsom said that more than 86 percent of his proposed new spending is one-time, rather than an ongoing funding commitment, and projected a balanced budget over the next four years.

The budget also includes a $500 million one-time commitment toward child care services.

“The governor’s proposed budget demonstrates his understanding of what kids need to succeed in school and life,” said Kim Belshé, director of First 5 LA, a public agency that promotes early childhood education in the Los Angeles area.

The proposed budget includes a rebranding of the state’s Earned Income Tax Credit as a “Working Families Tax Credit” that will more than double in size to $1 billion. It will help poor families with young children by providing a $500 credit for families covered by the credit with children under the age of six, and also will be expanded to reach full-time workers earning $15 per hour, about 400,000 additional families, he said.

The budget increases Affordable Care Act subsidies and expands Medi-Cal availability to approximately 138,000 undocumented young adults age 19 through 25.

The proposed budget includes $1.3 billion to spur housing development and expands state tax credits to further develop both low- and moderate-income housing, and proposes new housing on excess state property.

The proposed budget devotes $25 million — including $5 million to be made available in the current year — for an immigration “rapid response” program to help community groups and non-profits aiding immigrants. It also includes $75 million for such things as Deferred Action for Childhood Arrivals application assistance and other naturalization and immigration needs.

The budget’s $4.8 billion toward paying down retirement debt includes what Newsom called an unprecedented $3 billion supplemental contribution to pay down the state’s share of unfunded commitments to the California Public Employees’ Retirement System, or CalPERS. In addition, it commits $1.1 billion this year and an additional $1.8 billion in coming years toward liabilities in the California State Teachers’ Retirement System, or CalSTRS.

Those funding shortfalls have led the retirement plans to sharply ramp up required payments from the state and local government to cover promised benefits. Newsom said paying down those CalPERS and CalSTRS obligations would save taxpayers $14.6 billion over three decades.

Still, the funding gap in the retirement plans is daunting. The budget acknowledges a total of nearly $257 billion in unfunded pension and retiree health care commitments. CalPERS is short $58.8 billion and CalSTRS almost $103.5 billion, of which the state obligation is $35.3 billion.

Katy Murphy is based in Sacramento and covers state government for The Mercury News and East Bay Times, a beat she took on in January 2017. Before that, she was the news organization's higher education reporter, writing about UC, CSU, community colleges and private colleges. Long ago, she covered Oakland schools and other K-12 education issues.